Renovating your property can be a great way to maximise your rental return in the future — a well-maintained property is more likely to keep your tenants happy, and the level of rent that you are able to charge high. However, if you are looking to undertake a renovation project on one of your properties, there are a few things that you need to consider to ensure that you get the maximum return on your investment.
Repair before you replace
Reducing the turnaround time for new tenants moving in does make a lot of sense, however, many landlords often spend more money than they should in an effort to try and make this happen. Many of the major costs incurred come from replacing things that do not need replacing.
For example, if the last tenants that you had were particularly messy, they may have left your carpet, sofa, ceiling, or walls, in an undesirable state, and you may be tempted to replace them straight away. A professional cleaner like ChemDry can often make your furnishings look and feel as good as new, at a fraction of the cost of replacements.
Plan your renovation
Try and undertake your renovation project when you are in-between tenants, as you will be able to target your new ones with your improved property for higher rent. You can ensure that the turnaround for the renovation is as fast as possible by planning ahead — this way you will be able to get your property listed quickly and your income restored.
If you are planning to re-decorate, do so as soon as you can. Sometimes you can even begin before they have vacated the premises, and you should have a good idea what needs refurbishing after you have carried out your final inventory check. Book any professionals as soon as you know what you need to take care of. You should also book some storage space for any furniture for the duration of the renovation. Firms like Pickfords are nationwide and allow you to book your storage needs well in advance.
Tax deductions during renovations
It is important to know that all of the work that you carry out during your renovations is tax deductible. Each item of work will fall into two categories: repairs, which you can deduct from your rental income, and capital expenditure, which you can deduct only when you sell your property.
Repairs that you make can be defined as something that restores the property to its original condition, for example, replacing a carpet or repainting a wall. On the other hand, improvements that you make will be treated as capital expenditure, and are defined as work that improves a property beyond its previous condition, though what defines an improvement can often be quite murky. You can find the exact information on what constitutes a repair versus an improvement on HMRC’s website, though Taxation.co.uk have a clearer guide with examples.
If you consider these three things, you will stand yourself in better stead to maximise your profits after you have completed your renovation project.